A more recent version of these 6 Us Merger Control notes – written by University Of Cambridge students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our International Merger Control Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
MCL - International Merger Control
6 - US Merger Control Mind Map Abbreviation FTC -Federal Trade Commission (FTC) DOJ - Department of Justice HSR Act- Hart-Scott-Rodino Act
1. Purpose of US merger control - protect economic freedom + Mergers are governed by: opportunity by producing free and fair competition (lower
? Clayton Act. prices, better quality & greater choice).
? Sherman Act (sections 1 and 2).
? Federal Trade Commission Act (FTC Act) (section 5).
2. Competitors produce business capable to compete on price and quality. The principal statutory prohibition relates to transactions where "the effect of such acquisition may be substantially to lessen
3. Federal Anti-Trust Laws apply to all industries to every level competition, or to tend to create a monopoly" and is contained in of business in order to prohibit restraint of trade i.e. price- the following sections: fixing, conspiracies, corporate mergers that are likely to
? Section 1 of the Sherman Act in the context of mergers prohibits reduce competitive market. combinations "in restraint of trade".
? Section 2 of the Sherman Act, which prohibits monopolisation or
4. History of Merger control - attempted monopolisation and agreements to monopolise.? (1) Sherman Antitrust Act -prevent function of Section 5 of the FTC Act, which relates more generally to unfair or deceptive acts or practices and unfair methods of competition. monopoly/illegal restriction of trade. th th
? In 19 and 20 century, there was increase of creation of Pre-merger notification is governed by section 7A of the Clayton "trust" to resembled cartels, hundreds of small short-line Act (Hart-Scott-Rodino Act (HSR Act)). railroads were being bought up and consolidated into huge systems. 1
MCL - International Merger Control???
US economy requires free competition and the opportunity for individual Americans to build their own businesses in order to be successful. Congress passed the Sherman Antitrust Act almost unanimously in 1890 - as the core of antitrust policy. Makes it illegal to try to restrain trade or to form a monopoly. gives the Justice Department the mandate to go to federal court for orders to stop illegal behaviour or to impose remedies.
Regulatory authority FTC + DOJ- conduct merger review at the federal level Federal Communications Commission, state level Public Service Commissions - address competition issues as part of their own review State Attorneys General - conducts competition review at the state level
well known trusts - Standard Oil Company(SOC), in the 1870s and 1880s had used economic threats against S7 of Clayton Act competitors and secret rebate deals with railroads to build (M&A, JV) (a) Prohibit acquisition of stock/assets "effect of such a monopoly in the oil business. acquisition may substantially to lessen competition/tend to create a monopoly". In 1911 the Supreme Court agreed: (b) Not limit to completed merger, include partial interest
-SOC had violated the Sherman Act. It broke the acquisition/JV/other collaboration. monopoly into 3 dozen separate companies that (c) Transaction - violate the act may be blocked by federal competed with one another. It held that not all big district court/order of federal district court/FTC. companies, and not all monopolies, are evil. A trust had to somehow damage the economic environment of its competitors.?
Issues: Sherman Act was not clear what practices were prohibited. Businessmen did not know what they were permitted to do and government antitrust authorities were uncertain what businesses they could challenge.(2) Clayton Antitrust Act - 2
MCL - International Merger Control
-Passed in 1914
- to increase the government's capacity to intervene
- to break up big business.
- to prohibit specific business actions (i.e. price discrimination and tying) if they substantially lessened competition.
- removed the application of antitrust laws to trade unions, and introduced controls on the merger of corporations.?
United States Steel Corporation (larger than SOC) won its antitrust suit in 1920. It lobbied for tariff protection that reduced competition which was considered as "good trusts" that benefited the economy.
Mandatory: Where the ?
applicable thresholds are met and the transaction is not otherwise exempt.Voluntary: notifications accepted by DOJ.
Voluntary are not the FTC+Formal/informal guidance
Notification must be made ?
pre-closing. Parties have to observe a waiting period after filing notification and before closing. Normal waiting period is 30 days.
No consultation with the ?
agency in advance of filing except if:
- There is ambiguity in the reporting question.
- The parties want to engage the agency ?
substantively as early as possible.
The acquiring party must pay the filing fee (from US$45,000 to US$280,000 depending on the size of the transaction). In 2015, fees are:
> US$76.3 million but <
US$152.5 million: US$45,000. 3
MCL - International Merger Control?
But, FTC + DOJ may be willing to engage in ?
substantive discussions relating to smaller transactions even they do not trigger thresholds but result in a high market ?
concentration in a small or local market. Each party to the transaction must prepare and submit its own notification.
Shorter 15 days waiting Obligation to suspend periods are available for ? Suspend the transaction (no implementation before certain tender offer and the HSR Act waiting period bankruptcy transactions. expires/terminates early). Parties can file as soon as agency interprets they have a signed ? The implementation broadly. agreement in the form of a definitive agreement or actions non-binding letter of intent. ? Enforcement against "gun-jumping" (i.e. implementation before approval) even where the transaction was not formally completed.> US$152.5 million or but < US$762.7 million: US$125,000.> US$762.7 US$280,000.
Standing for Enforcement HSR Threshold
HSR Act - both acquiring and acquired person need to file pre- Pre-Notification merger notification with Agencies (DOJ + FTC) (1) Initial waiting period: Parties involved in proposed mergers, acquisitions of voting ? 30 days (begins when both parties file and usually after the securities, unincorporated interests or assets, or other business Agencies received completed HSR forms from both parties. combinations (e.g., joint ventures, exclusive license deals) that ? Agencies review the Parties' HSR filings along with any other 4
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